Ritter Insurance Marketing

Here is something I put together for everyone to tear apart.  I’m not a fan of mandated caps, but that seems to be pretty much where we are.  Given the Government’s desire to protect the taxpayer and the Medicare Beneficiary, this will happen.  Perhaps we can frame this in a way that is good for Medicare beneficiaries, taxpayers and agents, as well!!!??!! 

 

On page 20 of CMS’ interim rule, if you look at the areas where CMS is specifically looking for feedback, #2 asks about a flat fee schedule.  My proposal addresses this area where they are looking for feedback. 

 

PLEASE ADD YOUR COMMENTS BELOW IF YOU HAVE STRONG AGREEMENTS OR DISAGREEMENTS!!  Please understand that it will be impossible to get total agreement, so I’ll do the best I can to try to improve this based on your comments.

 

I’d like to develop a final version by early next week and have some sort of means to gather signatures (if you approve of the language) in order to send this to CMS.  Once we get a final version, I’ll send this to NAHU so see if they’ll support it as well.

 

Here is the complete document:

The clear objective of the Interim Final Rule is to ensure that agents or brokers enroll beneficiaries based on the plan that “best meet[s] their health care needs” by imposing requirements pertaining to agent and broker compensation designed to reduce existing financial incentive to enroll a beneficiary in a new plan based on the agent or broker’s financial interests rather than the beneficiary’s health care needs.

 

In meeting this objective we believe:

 

1. A well-trained, well-educated and fairly compensated independent agent force is critical to efficiently meeting the health care needs of Medicare beneficiaries.
2. The best way to diminish the financial incentive for an agent or broker to act in their financial best interests to the detriment of their customer is for CMS to establish a flat fee schedule which acts as a ceiling for agent/broker commissions.
3. The best basis for determining the ceiling for a Medicare Advantage fee schedule is by developing a schedule which is commensurate with the commissions which would be generated via Medicare Supplement and Stand alone Part D.  This would minimize financial incentives to steer Medicare beneficiaries to Medicare Advantage or Medicare Supplement, generally, or to one Medicare Advantage plan versus another plan, specifically.
4. Similar to other lines of business, when replacing an existing plan (whether Medicare Supplement or Medicare Advantage), the broker should complete a “Replacement Form” where they indicate the reason for the switch and sign a  statement that, “in their opinion, the agent believes that this change is in the best interests of the beneficiary’s health care needs.” (or something to that affect)

           

In support of this approach we offer the following:

 

 

 

Statement 1:  A well-trained, well-educated and fairly compensated independent agent force is critical to efficiently meeting the health care needs of Medicare beneficiaries.

 

1. Given the short selling season for Medicare Advantage, independent agents provide a very economical solution to Health Plans to provide a sufficient capacity of licensed, trained, educated insurance professionals to educate Medicare beneficiaries about their products and to provide on-going support.  The escalation in broker/agent commissions is a clear indication that Health Plans realize that the Independent Agent channel provides lower acquisition costs, is cheaper and more efficient than maintaining a staff of salaried employees.  Clearly, Independent Agent’s services are in high demand to fill this critical role.
2. Salaried employees of a Health Plan have more motivation to sell a plan which may not meet a beneficiary’s health care needs because they have limited options.  The salaried employee has only the options of their employer to offer the Medicare beneficiary.  Most likely, if they need to meet a minimum quota and/or they have a financial incentives/bonuses to sell only the Health Plan options of the plan for which they work.  The independent agent, on the other hand, can look at a much wider variety of options to determine suitability to meet the Medicare beneficiary’s needs.
3. A robust independent agent force provides a higher degree of competition which forces Health Plans which use salaried employees to keep their products competitive.
4. There are no limits on the advertising budget of a Health Plan.  Pouring dollars into advertising may not be in the best interests of the Medicare beneficiary and the Medicare Advantage program as a whole.  Additionally, there is no cap on the compensation arraignments of salaried employees, so there may be even greater financial incentives to put Medicare beneficiaries in plans which do not serve their health care needs.  Independent agents are limited in their advertising to amounts which can be justified by receiving a fixed fee.  Therefore, one fee caps both advertising costs and agent compensation.
5. A highly competitive independent agent force will reduce the financial incentive of “greedy” agent to inappropriately act in their short term financial interest to move a Medicare beneficiary to a plan which is not based on the beneficiary’s health care needs.  By having an active, competitive agent force, there is a strong likelihood that an agent who has the best interests of the beneficiary in mind will easily replace this with a more appropriate plan.  This serves to eliminate any compensation to the greedy broker and rewards the broker who appropriately services their client.
6. If independent agents were not fairly compensated, there may be an insufficient supply of well-trained, well-educated licensed professionals to accomplish all of the objectives above.  This would result in a lower degree of service to the Medicare beneficiary seeking unbiased assistance in determining which plan will meet their needs.

 

Statement 2:  The best way to diminish the financial incentive for an agent or broker to act in their financial best interests to the detriment of their customer is for CMS to establish a flat fee schedule which acts as a ceiling for agent/broker commissions.

 

1. As long as there are variances in commissions between plans, there will be financial incentives to favor one plan over another.
2. The Health Plans should have the option to set their broker commission at a level below the ceiling, if they choose to, if they wish to attract agents to sell their plans by offering a stronger benefit package for the Medicare beneficiary.  The ceiling serves to place a reasonable maximum on compensation to eliminate excessive compensation which would create a disticnt financial advantage to the agent/broker to sell one particular plan.
3. The commission payout should be level for 6 years.  Regardless of whether the person is aging into Medicare, moving from Original Medicare or Moving from Medicare Advantage.  There should be no incentive to target one group over another.  In practice, virtually all Medicare Supplement Insurance companies pay the same level commission for years 1 through 6.  The Medicare Advantage fee schedule should mirror that.
4. This would have the added benefit of promoting long-term relationships between beneficiaries and the plans in which they are enrolled.  There would be no financial incentive for the existing broker to make a change unless the plan was no longer in the beneficiary’s best interest and in jeopardy of being replaced by another broker with a more appropriate plan.

 

Statement 3:  The best basis for determining the ceiling for a Medicare Advantage fee schedule is by developing a schedule which is commensurate with the commissions which would be generated via Medicare Supplement.  This would minimize financial incentives to steer Medicare beneficiaries to Medicare Advantage or Medicare Supplement, generally, or to one Medicare Advantage plan versus another plan, specifically.

 

1. Generally, broker Medicare Supplement commissions are 20% and the average Medicare Supplement premium is $1,500.  This equates to a six year level commission of $300/enrollee.  Additionally, a stand alone Part D benefit pays a commission of approximately $50.  To provide roughly EQUAL compensation for an MA versus a Medicare Supplement without Part D would be $300/year for 6 years and to provide roughly EQUAL compensation for an MAPD versus a Medicare Supplement with a stand alone Part D would be $350/year for 6 years.
2. Due to the training required, the complexity of the plans, the higher degree of on-going service work and the regulatory and marketing requirements, we estimate that the Medicare Advantage fee should be approximately $50 higher/enrollee in order to be commensurate with the Medicare Supplement commission.  This puts the MAXIMUM fee for 2009 for Medicare Advantage without prescription drugs at $350/year for six years and the MAXIMUM fee Medicare Advantage with prescription drugs at $400/year for six years.
3. FMO overrides for Medicare Supplement are generally 5%.  This equates to $75 for an average $1,500 premium.  However, training and certification requirements are higher for FMO’s than with Medicare Supplement, so we suggest a Maximum FMO override of $100/year for six years for 2009.
4. Agent max fees and FMO overrides should be indexed to inflation.

 

Statement 4:  Similar to other lines of business, when replacing an existing plan (whether Medicare Supplement or Medicare Advantage), the broker should complete a “Replacement Form” where they indicate the reason for the switch and sign a  statement that, “in their opinion, the agent believes that this change is in the best interests of the beneficiary’s health care needs.” (or something to that affect)

 

1. The issue of improper replacement of one policy for another which is not in the best interest of the client is an issue in more lines of insurance than just Medicare Advantage.  Replacement forms are mandated for Medicare Supplement, Life Insurance and Annuities where there is replacement of existing coverage.  CMS should work with the NAIC to develop a model replacement form which is similar to forms they have developed for other products.
2. The replacement form would also be required of the Career Salaried employees as well as independent brokers, so ANY time there is a replacement, there is a documentation of the reason for the change.

 

Clearly, no approach could be considered perfect.  We believe, however, this approach clearly focuses the attention of the health plan on maintaining the best possible benefit package for the Medicare Beneficiary.  This would be true of plans which use brokers (in order to attract the best brokers) and plans which do not use brokers (in order to preserve their business.  This also allows Health Plans to focus their attention on developing better products and achieving better outcomes for their members, as opposed to trying to “out-maneuver” one another with lavish compensation.